capitalist versus socialist progress

[Louis Proyect <lnp3@xxxxxxxxx>]

>We've heard that NK was the site of an economic miracle in its first
>few decades, but now it's a wreck. What happened?
>
>Doug

Martin Hart-Landsberg, "Korea: Divison, Unification and US Foreign Policy,"
Monthly Review Press, 1998:

The End of the Economic Miracle

North Korea's economic advance began to slow in the second half of the
1960s. The government announced in 1966 that its seven-year plan would not
be completed on time, and the planning period was extended for three years,
until 1970. A new six-year plan was launched in 1971. Although the North
announced its successful completion in late 1975, four months ahead of
schedule, no new plan was presented in either 1976 or 1977. In spite of
these difficulties, even CIA estimates, as summarized by Lone and
McCormack, showed that, "as of early 1976, the North Korean economy was
out-producing the South in per capita terms in almost every sector, from
agriculture through electric power generation, steel and cement, to machine
tools and trucks (but not in televisions and automobiles)." Nevertheless,
the North was losing the economic race. Between 1960 to 1976, Northern per
capita GNP grew by an average annual rate of 5.2 percent; Southern per
capita GNP grew by 7.3 percent. The South caught the North on a per capita
basis sometime in the mid to late 1970s, and then continued to pull further
ahead.

North Korea's economic difficulties had several causes. Among the most
important were the decline in aid from the Soviet Union and the division
impelled diversion of scarce resources into the military sector. While
North Korea has always prided itself on following an economic strategy
based on the traditional principle of juche (self-reliance), the country
also benefited significantly from foreign aid. For example, North Korea
received substantial aid from the Soviet Union and other Eastern European
countries in 1953 and 1956 that helped finance its three-year plan.
According to one scholar: During the Three Year Plan, 75.1 percent of all
capital investments of the DPRK was financed from the grants from the
communist bloc. In these years 24.6 percent of the Pyongyang state budget
was financed from aid from the bloc countries (including credits). Finally,
aid and credits from socialist countries financed 77.6 percent and 3.9
percent respectively of all DPRK imports during the Three Year Plan.

The Soviet Union also gave substantial scientific and technical aid, almost
all without charge. By 1962, the Soviets had given North Korea over 2,581
technical documents; some 935 were drawings of complete plants or
machinery. This technical support enabled North Korea to produce many
industrial products, including trucks, cranes, compressors, agricultural
machinery, electric motors, transformers, and tractors, which greatly
contributed to the country's rapid industrialization.

Beginning in the late 1950s, relations between the DPRK and the Soviet
Union grew tense. In 1956, the Soviets started pressuring the North to give
up its attempt to construct a heavy industrial base and instead concentrate
on producing light manufactures and primary commodity exports as part of a
COMECON-structured division of labor. The DPRK did join COMECON in 1957,
but only as an observer; it refused to accept any limitations on its
national planning.

Complicating the dispute over economic strategy was a growing split between
China and the Soviet Union. Kim had worked hard to remain friendly with
both countries and was therefore placed in an awkward position by this
development, especially the increasingly frequent Soviet criticisms of
China. Kim actually supported the Chinese in their confrontation with the
Soviet Union. He was critical of what he saw as Soviet revisionism,
especially the policy of "peaceful coexistence" with the United States, the
very country that had prosecuted the Korean War. Kim believed that
"peaceful coexistence" reflected a racist attitude on the part of the
Soviet Union toward Asia. As he saw it, détente was a policy that was
developed strictly within, and had meaning only in, a European context. It
could have no meaning for Vietnamese, Chinese, or Koreans, people whose
countries were divided, with the socialist halves under threat of attack
from the United States.

In the early 1960s, when the Soviets started openly criticizing the DPRK
for its economic plans and unwillingness to condemn China, Kim stood his
ground. The result was the sudden withdrawal of Soviet aid and technical
support and, from 1962 to 1965, a reduction in trade between the two
countries. Not surprisingly, this had a serious impact on the North Korean
economy.


Louis Proyect

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